Disposition Strategies On Bad Assets In State-Owned Commercial Banks

The large amount of bad assets is a serious problem that prevents our country' s financial industry from moving forward smoothly. Since 1999, for improving the quality of banking sector' s loans, 14000 billion yuan bad assets have been taken from Industrial and Commercial Bank of China, Agriculture Bank of China, Bank of China and China Construction Bank to China Huarong Asset Management Corporation, China Great Wall Asset Management Corporation, China Orient Asset Management Corporation and China Cinda Asset Management Corporation respectively. Since 1999, the People' s Bank of China has claimed all commercial banks to classify "five class classification management mode" to manage loans. Four state-owned commercial banks also continuously enhance credit management and try their best to withdraw non-performing loans. They have made great progress. The total amount of bad assets and the percentage of bad loans in all loans have both dropped since 2001. But both figures are still relatively higher than western advanced country banks' figures.The existence of large amount of bad assets has many negative effects: To the banking sector, it reduces bank' s profits and influences the stability of banking system. To the country, it reduces the country' s fiscal revenue and may cause inflation and financial crisis. Therefore, it is an urgent problem that should be solved as soon as possible.In this dissertation, bad assets mean bad debts of bank loans. The author has carefully analyzed the current situation of bad assets in today' s state-owned commercial banks, the reason why large bad assets generated and the management mode for bad assets. The author has also compared the scale of bad assets in banking sector between China and western countries.Based on the above analysis, the author has advised two managementmodes to reduce the amount of bad assets. The first one is how to control the credit risk before granting loans. The second one is how to dispose of bad assets after they arose. At the same time, the author has also studied different methods to deal with the existing bad assets.